7 Analyst Stocks Under $10 With Massive Upside Potential

March 12, 2016 by Jon C. Ogg

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Source: Thinkstock
The year 2016 has migrated from a nerve-racking year back to a year of hope. The Dow Jones Industrial Average closed out the first full week of March north of 17,200, after having traded just under 15,500 on January 20. Amazingly, this is almost a full return to the end of 2015 when the Dow closed at 17,425. After six weeks of straight selling were followed by four weeks of rallying, what are investors and traders supposed to think now?

The markets are still cheering quantitative easing moves from Japan and Europe, even as the global growth story has been slowing. The U.S. Federal Reserve also still seems eager to raise interest rates in 2016. Maybe all of this is driving investors into value and some under-followed trends. After all, presidential election rhetoric can be targeting many of the larger companies in America.

24/7 Wall St. is always on the hunt for undiscovered opportunities and hidden value in the financial markets. After all, even in hard times there are always some opportunities that can be found. Each morning we review dozens of analyst upgrades, downgrades and initiations. By the end of each week we have reviewed hundreds of analyst calls from bulge bracket firms like Goldman Sachs and Merrill Lynch all the way down to regional and boutique firms whose reach is generally smaller.

One category of analyst calls that often comes with great upside is in the small-cap and low-priced stocks. Some of these stocks trade under $10 per share or less. Sometimes the upside just seems ludicrous, but other times more reasonable. When analysts give Buy ratings to Dow or S&P 500 stocks, they typically are calling for upside of 8% to 15%. In the lower-priced and small-cap stocks, that upside projection from analysts can be 25%, 50% or even over 100%.


Best not to trust any analyst call blindly — there is no free lunch. These small-cap or low-priced stocks can come with massive risks. Some could even ultimately fail or cease to exist in the years ahead. Investors also need to consider that sometimes analysts just get it wrong, or that outside forces wreck a story. Biotech, fad investing (e.g., rare earths, 3D printing), micro-cap growth and even battered turnaround candidates just often fail to live up to their potential.

Here are seven of the analyst calls in stocks monitored by 24/7 Wall St. that traded under $10 per share in the week of March 7 to March 11.

AK Steel Holding Corp. (NYSE: AKS) was reiterated as Overweight with a $5.00 price target at JPMorgan this past week. Its stock was up in the double digits for a percentage gain after iron ore prices continued to rise. JPMorgan was quite bullish on four U.S. steel stocks with Overweight ratings on the group. Investors just need to keep in mind that AK Steel shares have effectively doubled off of their lows. After closing Friday down 3.3% at $4.01, the 52-week trading range is $1.64 to $5.93 and the consensus analyst price target was down at $2.35.

Banco Santander S.A. (NYSE: SAN) was raised to the prized Conviction Buy List at Goldman Sachs last week. What stood out is that many companies have a Buy rating at the firm before Goldman Sachs is willing to add it to the Conviction Buy list, but Santander had a Neutral rating prior to the call. Banco Santander is a top Spanish bank still worth some $70 billion, but this is a fraction of its glory days. Even after a 6.7% gain on Friday, its share price is $4.93, and it has a 52-week range of $3.59 to $7.79. This American depositary share had a share price of $12 just five years ago, and it was a more than $20 stock in 2007 before the recession hit and before we knew about acronyms like PIIGS for the weakest links in the euro.

Regions Financial Corp. (NYSE: RF) was reiterated as Buy with an $11 price target at Jefferies on March 7. This was versus an $8.39 prior close, and Friday’s closing price was $8.24 after a 3.4% gain. The stock has a 52-week range of $7.00 to $10.87, and its consensus price target is $10.16. If readers want a tempering or counter-call against the bullishness here, Regions was on the American Banker’s list of 10 banks whose stocks are getting hurt by low oil prices with shares down close to 20% from a year ago.

Sunrun Inc. (NASDAQ: RUN) was started as Buy with a price target of $15 at Deutsche Bank on March 10. This was versus a $6.65 closing price ahead of the call, but Friday acted as give-back of the gains as shares fell 11% to $6.36, after earnings and 2016 guidance for residential solar energy systems failed to drive the stock. The consensus price target is now lower at $14.71, but it had been $18.42 ahead of Deutsche Bank’s call. Sunrun’s 52-week range is $4.86 to $14.95.

Weatherford International PLC (NYSE: WFT) was raised to Buy from Neutral at Goldman Sachs in a big oil price range upgrade. Its price target was raised to $9.75 from $8.00, compared to a $6.61 prior close. Weatherford had a consensus price target of $9.20 and a 52-week range of $4.95 to $14.91, and its market cap was roughly $5.6 billion. It was also named in the UBS top oil services stocks to buy for when oil pops this past week. UBS has a price target of $11.00 on the stock. Weatherford shares rose 9.5% to $7.24 on Friday after the Goldman Sachs call.


Proteostasis Therapeutics Inc.

(NASDAQ: PTI) was started as Outperform with a $20 price target at RBC Capital Markets on March 7. This was versus a $5.56 close, but shares closed Friday at $8.96 after falling 6% that day. If RBC’s price target seems too aggressive, Proteostasis was also started with a Buy rating and was assigned a $15 price target at H.C. Wainwright last week. The stock has a 52-week range of $5.27 to $13.99. This is a new company, being one of the few IPOs to make it to market in 2016 with a February 11 IPO price of $8.00 per share for 6.25 million shares. The company offers disease-modifying therapeutics for cystic fibrosis. Leerink Partners and R.W. Baird, which were also underwriting firms in the IPO syndicate, each have also assigned an Outperform rating.

Determine Inc. (NASDAQ: DTRM) is a microcap niche stock that deserves a special caveat. Its market cap is barely $21 million and the average volume is only about 20,000 shares per day. The company is also set to present at a ROTH Capital conference in the coming week. The stock was started as Buy with a $4.50 price target at Maxim Group on March 9. Note that it was versus a $1.60 close ahead of the call, but shares went out on Friday at $1.92. Determine offers enterprise contract management solutions like Selectica SmartContracts. Its 52-week range is $1.39 to $7.99.

Again, on Wall Street there is no such thing as a free lunch. What sounds like big upside potential can easily turn a large sum of money into a pile of ashes.